Lowe’s Cos. Inc. and The Home Depot Inc. reported modest growth in digital sales in the most recent quarter. In earnings calls with Wall Street analysts this week, the two retailers outlined comparable visions of an omnichannel future.
Neither retailer reports dollar figures for ecommerce sales. But both home-improvement giants said digital sales continued to rise in their respective fiscal Q4s, albeit slower than during the COVID-19 pandemic’s peak. Home Depot said online sales grew approximately 6% in the fiscal fourth quarter from a year earlier. Ecommerce growth for 2021 was 9%.
Lowe’s, by contrast, had stronger ecommerce growth. The retailer said sales made through Lowe’s.com grew 11.5% in Q4 and 18.4% for the fiscal year ending Jan. 28, 2022.
Home Depot said overall net earnings for the fiscal fourth quarter rose 17.3% to $3.35 billion from $2.86 billion a year earlier. Overall net earnings for fiscal 2021 rose 27.7% to $16.4 billion from $12.9 billion a year earlier.
Lowe’s said its overall net income rose to $1.2 billion in Q4 from $978 million a year earlier. Overall net income for fiscal year 2021 increased to $21.3 billion from $20.3 billion in the prior year.
Home Depot is No.4 in the 2021 Digital Commerce 360 Top 1000 and Lowe’s is No. 13.
Lowe’s, Home Depot take similar delivery routes
In earnings calls, executives from both retailers emphasized their commitment to omnichannel services, while outlining similar approaches to delivery and fulfillment.
On the same day it released its Q4 earnings, Lowe’s announced a new deal with Instacart, the grocery delivery service. Under the agreement’s terms, Instacart will provide same-day delivery to consumers of approximately 20,000 Lowe’s items, including small home appliances, building supplies, light fixtures, and garden supplies. The delivery service is available now in Boston and Charlotte, North Carolina. Shoppers in those markets will see the Instacart option on Lowe’s.com when ordering for delivery.
Instacart and Lowe’s announced a pilot program for same-day delivery.
“Online is a key piece of our omnichannel strategy, and the combination of Lowe’s home-improvement expertise and Instacart’s ability to help deliver right to your door within hours offers a new, convenient way to shop,” Mike Shady, Lowe’s senior vice president of online, said in the press release announcing the deal.
The Instacart deal comes just four months after Home Depot became the first merchant to hire Walmart Inc.’s GoLocal delivery service to offer same-day and next-day delivery. Walmart is No. 2 in the 2021 Digital Commerce 360 Top 1000.
One Supply Chain and market delivery facilities
The retailers have both poured millions into improving their supply chain and logistics systems in recent years. This week’s earnings calls highlighted that things have not gone as smoothly as the retailers had hoped.
In 2017, Home Depot said it would invest $1.2 billion in a series of initiatives it dubbed One Supply Chain. The plan was to add about 150 logistics facilities in the United States within five years. Of course, that was before the pandemic disrupted the global supply chain.
In the Q4 earnings call Craig Menear, chairman and CEO of Home Depot, told analysts the challenges of the pandemic and a recent acquisition have slowed progress, according to a transcript on Seeking Alpha.
“Our original supply chain investment plan called for approximately 150 new facilities. And while many of these facilities will be complete by the end of 2022, some will take a bit longer due to the constraints we’ve seen as it relates to COVID and also taking into account our recent acquisition of HD Supply,” Menear said.
In particular, the retailer’s so-called flatbed distribution centers—specialized centers for delivering lumber, drywall and other bulky items, mostly to professional contractors—are behind schedule.
“We expect to end the year with approximately 15 or about half of our intended goal,” Menear said. “The FDC in Dallas was the first we stood up. It has been operating for just over two years, and we really like what we’re seeing out of this facility. But what we’ve learned is that it takes time to assort, optimize and really commercialize these buildings.”
Things are moving faster with Home Depot’s rollout of its last-mile fulfillment centers, which the retailer calls market delivery operations, or MDOs. Menear said he expects to “have approximately 85 of the 100 that we plan fully operational by year-end.”
Lowe’s delivery and fulfillment plans are somewhat similar to those of Home Depot. But Lowe’s CEO Marvin Ellison told analysts that logistics initiatives are on schedule and performing well.
Ellison told analysts that Lowes’ initiatives center on what it calls a market delivery model in which, “big and bulky products flow from our supply chain directly to customers’ homes. This replaces the highly inefficient store-delivery model where each store acts as its own distribution and transportation center for these products.”
The retailer plans to move its entire operation to the model by the middle of 2023.
“As we continue to expand our market-based delivery model, we’re freeing up space in our 10,000-square-foot store back rooms, which on average are considerably larger than our competition,” Ellison said.
Going pro and chasing pets
Both retailers are rolling out new programs aimed at driving growth from professional contractors.
Lowe’s is offering gift cards, tax tips, snacks and a chance to win new trucks as part of an expanded customer loyalty program for contractors. Home Depot’s Pro Xtra program offers discounted pricing, rewards points and business-management tools.
“At the beginning of the pandemic, both Home Depot and Lowe’s were seeing unprecedented sales growth from a new wave of stuck-at-home improvement projects,” says Tom Caporaso, CEO of Clarus Commerce, which builds loyalty programs for retailers. “As that began to subside, both companies saw their core loyalty customer base revert back to DIY experts and business owners. With that in mind, Home Depot and Lowe’s both implemented changes to their loyalty programs uniquely targeted at professionals buying in bulk. If Home Depot and Lowe’s expanded their existing loyalty programs to benefit general consumers, both brands could see big upticks in engagement.”
One area where Lowe’s is doing it alone is in a new consumer-focused, store-in-a-store for pet owners. The retailer recently introduced Lowe’s + Petco, a specialty store where consumers can shop for Petco products and services at Lowe’s locations.
- Net sales of $35.7 billion, up 10.7% from $32.3 billion a year earlier
- Operating income of $4.8 billion, up 18.2% from $4.1 billion a year earlier
- Net income for the fiscal fourth quarter rose 17.3% to $3.4 billion from $2.9 billion a year earlier
- Sales through its digital platforms grew approximately 6% from a year earlier
- Net sales of $151.5 billion, up 14.4% from $132.1 billion a year earlier
- Operating income of $23 billion, up 26.1% from $18.3 billion in fiscal year 2020
- Net earnings for fiscal 2021 rose 27.7% to $16.43 billion from $12.9 billion a year earlier
- Sales through digital platforms grew 9% for the fiscal year
For the quarter ended Jan. 28, 2022, Lowe’s reported:
- Net sales of $21.3 billion, up 5.0% from $20.3 billion a year earlier
- Operating income of $1.8 billion, up 21.1% from $1.5 billion a year earlier
- Net income rose 22.7% to $1.21 billion from $978 million a year earlier
- Sales made through digital channels grew 11.5% from a year earlier
For the fiscal year ended Jan. 28, 2022, Lowe’s reported:
- Net sales of $96.3 billion, up 7.4% from $89.6 billion in fiscal year 2020
- Operating income of $12.1 billion, up 25.4% from $9.64 billion in the prior fiscal year
- Overall net income increased 5.1% to $21.3 billion from $20.3 billion in the prior year.
- Sales made through digital channels rose 18.4% from a year earlier
Percentage changes may not align exactly with dollar figures due to rounding.
